Michigan House Speaker Andy Dillon sparked statewide debate this summer when he proposed
combining all Michigan public-sector employees into a statewide health plan.
The Redford Township Democrat said the plan would save money through economies
of scale, and through bringing benefits public employees receive more in line
with those in the private sector.

Capping district payments and sharing premium increases are both responsible ways for school districts to gain control of expenses.

Though the debate over public employee health benefits is
now occurring on the state level, it will sound very familiar in many Michigan
cities, villages, counties and school districts. Governments at all levels face
fiscal problems, and one cause of cost overruns has been employee benefits
agreed to in collective bargaining.

In response, many school districts are finding ways to
bargain for increasingly consumer-driven health care. Districts have negotiated
cost-saving shifts to provider networks, office visit co-pays and higher
prescription co-pays, as well as health savings accounts. A number of Michigan
public school districts also have started sharing premium costs with their
employees, a practice common in the private sector.

"We knew that to be fiscally responsible we needed to have
employees share in insurance costs," Superintendent William Pearson of South
Lyon Public Schools said in a telephone interview. The South Lyon district
began sharing premium costs in the late 1990s.

Under longstanding contract language, the district pays the
first 5 percent of the increase in health insurance premiums in a given year,
while employees pay for any further increase. In 2008-2009, teachers and
administrators paid a total of $1,235 per person, Pearson said.

In addition to capping the district's insurance costs,
South Lyon's contract pegs salary schedule increases to state per-pupil funding
and also requires employees to contribute to increased retirement costs,
according to Pearson.

"That's always helped us to budget," he said. "It gave us stability, and that's what we were after."

A 2007 survey by the Mackinac Center, which publishes
Michigan Privatization Report, showed that 75 of the 150 public school
districts that participated had bargained contract agreements in which teachers
or other employees paid a share of their annual health insurance premium. At
the time of the survey, the monthly teacher share ranged from $20 to more than
$125.

Some of those payments reflect only employees who choose
voluntarily to "buy up" to a more expensive and extensive health care plan,
typically the Super Care plan offered through the Michigan Education Special
Services Association, a third-party insurance administrator affiliated with the
Michigan Education Association. But in some districts, teachers are paying part
of the annual premium for less-expensive plans, such as MESSA's Choices II.

Like South Lyon, some
districts cap their expenses in the form of a "first 5 percent" limit. Others
negotiate a dollar cap, sometimes benchmarked to state funding, while others
split the total premium in 90/10 or 85/15 arrangements. One example is the
Traverse Bay Area Intermediate School District, which recently settled a
contract that continues a 10 percent health premium contribution from
employees.

Traverse Bay employees will switch from Super Care to
Choices II, a preferred provider plan, and now will be responsible for certain
co-pays in addition to the premium contribution. They will pay a deductible if
they choose out-of-network providers.

Their monthly premium contribution will decrease, Hill
explained, because the total annual cost for Choices II is about $257,000 less
than for Super Care. That savings made possible a 2 percent pay increase in
2009-2010 and a 2.25 percent increase retroactive to the beginning of the
2008-2009 school year, he said.

"Any percent (salary) increase was based on movement to
find that revenue," he said. In researching pay scales and health care plans in
other districts, Hill noted, "We knew we had to hold firm with our 10 percent.
We didn't see a lot of districts doing that."

Elsewhere in northern Michigan, Sault Ste. Marie Area
Schools and its teachers recently negotiated a contract that puts a dollar cap
on the amount the district will pay. Teachers will pay the difference between
the cap and the premium total, Superintendent Daniel Reattoir said.

"Our goal was not only to control the cost, but to put
ownership in their (employees') hands," Reattoir said, explaining that
employees have paid part of their health care premium at least since 2001. In
2009-2010, teachers will pay about $118 in each of 20 pay periods for Choices
II, or about $60 for dental and vision coverage only.

"This way it requires everybody to get involved, because if
their co-pay is increasing, they want to know why," he said.

Putting these caps in place gives districts greater control over their expenses, but
perhaps more importantly, it communicates to the employees themselves the cost
of benefits they receive. A dollar saved in benefits can be a dollar spent on
salary.

That's the point that arbitrator Donald Burkholder made
when he recommended that Leslie Public Schools and its teachers come to terms
on sharing costs for health insurance. Some of the anticipated savings should
be spent to give teachers a raise, he wrote.

"(N)ot agreeing to some form of limit when selecting a
preferred (health) plan would be irresponsible and illogical," Burkholder wrote
last fall, as the fact-finder in a case between the school district and the
Ingham County Education Association. "An additional advantage (to such an agreement) is that it motivates more
attention to plan selection and use by the insured."

Teacher contributions in Leslie Public Schools rose
significantly in 2007-2008 and 2008-2009, due to contract language requiring
them to pay any premium increase in the interim period between contracts. When
their contract expired in 2007, teachers were paying about $780 a year toward
the MESSA TriMed plan. By 2008-2009, with no new contract in place, some
teachers were paying up to $2,460 a year, according to Scott Blankinship, the
district's former business manager.

The district and teachers signed a four-year pact early in
August that puts teacher contributions at $1,040 per year and includes higher
co-pays and deductibles.

Blankinship echoed South Lyons' concerns about budget
stability and emphasized the need for predictable costs: "Without that cap, or
some control, we're very vulnerable," Blankinship said in a telephone
interview.

Lansing Waverly also has negotiated an agreement with its
teachers that caps the district's premium contribution in any given year,
according to business manager Rob Spagnuolo. In the coming year, the district
will pay a maximum of $1,280 for a two-person plan and a maximum of $1,375
monthly for family coverage.

Nationally, most workers who have insurance coverage
through their employers contribute to the premium, according to the 2008
Employer Health Benefits survey conducted by the Kaiser Family Foundation. Only
7 percent of workers with family coverage and 20 percent of workers with
individual coverage work for a firm that picks up the total cost, the survey
showed.

On average, workers with family coverage pay about 27
percent of the premium, or $280 monthly, while those with single coverage pay
about 16 percent, or $60 a month, the survey found.

As an occupational group, public school teachers "cost"
more in compensation than other occupational groups in state and local
government, according to a March 2009 Compensation Survey by the U.S.
Department of Labor.

The survey found that all state and local government
workers combined cost an average of $40 for every hour worked, made up of $26
in wages and $14 in benefits. Public school teachers at the elementary and
secondary level, however, cost an average of $52 an hour, made up of $37 in
wages and $15 in benefits.

The benefits packages negotiated by Michigan public school
workers typically exceed those in the private sector. Despite receiving 9.5
percent more in state per-pupil revenues now than in 2004, public school
districts continue to face budget trouble. Capping district payments and
sharing premium increases are both responsible ways for school districts to
gain control of expenses.